Converting ferries to LNG will save money, reduce fares: CEO

Converting two Spirit Class vessels to run on liquefied natural gas will pay for itself fairly quickly, then reduce fares across the ferry system, said BC Ferries CEO Mike Corrigan.

The publicly-owned company has applied to ferry commissioner Gord Macatee for permission to proceed with mid-life upgrades to the Spirit of Vancouver Island and the Spirit of British Columbia that will include converting the vessels so they can run on LNG as well as the current diesel.

Corrigan declined in an interview to say what the upgrades will cost since the company plans to put the work out for bids, but allowed that it will be in the tens of millions. CFAX radio in Victoria quoted Corrigan saying the expected price tag is $100 million.

"It's one of these things that have an extremely strong payback," said Corrigan. LNG costs half as much as diesel and the company expects to save $8.5 million a year from the conversion, he said, plus another $650,000 by reducing hull drag with modifications that include a new low friction coating.

The changes will allow BC Ferries to keep fares three percent lower across the fleet than they otherwise would have been, Corrigan said. "It's a real game changer for BC Ferries."

The two vessels are the largest in the fleet and consume about 15 percent of the fuel the company buys, which last fiscal year totalled $126 million. They were built in the 1990s and have an expected 27 years of service life remaining. BC Ferries plans the upgrades will be completed between 2016 and 2018.

The fuel conversion is not dependent on the provincial government's push to develop an export industry for LNG, he said. "The LNG we need already exists in the province."

Corrigan acknowledged there's risk the price of LNG could rise in the mid-term, but said the ferry company has ways to hedge on fuel prices and to lock in the price differential between natural gas and diesel.

According to the Alternative Fuels Data Center website from the U.S. Department of Energy, LNG has lower carbon emissions than diesel does over its life cycle.

Corrigan said BC Ferries is doing everything it can to keep costs down and is "keenly aware" of the role it plays in communities.

Representatives at the Union of B.C. Municipalities are scheduled to discuss a report Tuesday that found ferry fare hikes killed $2.3 billion in economic activity over the past decade.

Corrigan noted that the report's recommendations were aimed at the provincial government. "We're the service provider and we'll do the best we can to provide the service the government contracts with us to provide," he said.

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria. Find him on Twitter or reach him here.